2010

Abstract: Using retail price survey data, I investigate whether international goods' market segmentation implied by dispersion in goods' prices is consistent with market segmentation implied by observed trade flows. A Ricardian trade model, with heterogeneous and asymmetric bilateral trade costs, accounts for 85 percent of the average price dispersion and 21 percent of the across good variation in it. Adding good-specific distribution costs reproduces 96.5 percent of the average and 32 percent of the variation in price dispersion. Allowing for good-specific trade costs enables the model to match the average perfectly and explain 48 percent of the variation. While trade and distribution costs explain price dispersion of an average retail good, they account for only half of the across good variation.

Abstract: We study a two-player dynamic investment model with information externalitiesand provide necessary and sufficient conditions for a unique switching equilibrium. When the public information is sufficiently high and a social planer therefore expects an investment boom, investments should be taxed. Conversely, any positive investment tax is suboptimally high if the public information is sufficiently unfavorable. We also show that an investment tax may increase overall investment activity.

Abstract: The Axiom of Monotonicity (AM) is a necessary condition for a number of expected utility representations, including those obtained by de Finetti (1930), von Neumann and Morgenstern (1944) and Savage (1954). The paper reports on experiments that directly test AM by eliminating strategic uncertainty, context, and peer effects. In this sterile and simple environment we do not observe AM violations under uncertainty but we do observe violations under ambiguity.

Abstract:We study a class of direct revelation mechanisms which implement outcome functions satisfying a monotonicity condition. Monotone implementation is in dominant strategy equilibrium when values are private and in ex post Nash equilibrium when values are interdependent. The original Vickrey-Clarke-Groves mechanism is not a monotone implementation mechanism although its many extensions to interdependent value models are. The extraction mechanisms of Cremer and McLean (1985) are a special form of monotone implementation mechanisms for finite type spaces.

Abstract: This article introduces a unified methodology for estimating and testing nonlinear econometric models defined by conditional moment restrictions. These models are very common in econometrics, such as nonlinear rational expectation models. The current approach for inference in these models is the generalized method of moments (GMM) methodology, as proposed by Hansen and Singleton (1982). Although GMM provides a unified methodology for statistical inference that is simple to implement, it may yield inconsistent statistical procedures because it just employs a finite number of moments. This is a very important theoretical and applied problem, as illustrated by a simplified consumption-based asset pricing model. Contrary to GMM, the methodology proposed in this article delivers consistent statistical procedures because it employs an infinite number of moments that characterizes the conditional moment. In addition, the proposed methodology is widely applicable for general time series data and easy to implement. In particular, the proposed specification test relies on a novel and very simple wild bootstrap procedure.

Abstract: This paper explores the relationship between fertility and the introduction of new laws regulating cohabitation, in a context of low fertility and high out of wedlock childbearing. We show that in France, while fertility and marriage rates moved closely together before 1999, since the introduction (in 1999) of the "Pacte Civil de Solidarité" (PACS) - a cohabitation contract less binding than marriage - this relationship is much weaker. Surprisingly, legal unions (defined as marriage plus PACS) and fertility continue to move together after this date. We provide evidence of the relationship between the introduction of PACS and fertility, utilizing the regional variation in the number of PACS per woman (PACS intensity) and the differences in fertility before and after 1999. We show that French Departments with high PACS intensity (excluding Metropolitan Paris). However, they did experience and increase in their fertility levels after the introduction of PACS. This suggests the need to collect better and more detailed data, in order to assess whether the recent increases in French fertility can be partially explained by the availability of PACS.

Abstract: Employment to population ratios differ markedly across OECD countries relative to rates in the U.S., especially for persons aged 55-69. Social security features also differ across the OECD, particularly with respect to replacement rates, entitlement ages and earnings tests. I conjecture that differences in social security features explain many differences in employment to population ratios at older ages. I assess my conjecture quantitatively with a life cycle general equilibrium model of retirement. At ages 60-64 the correlation between my model’s simulations and observed data is about two thirds. The replacement rate and the earnings test explain 90% of observed variability, implying that differences in entitlement ages do not explain differences in employment to population rates at older ages.